"The Income-Tax Bill 2025, introduced by the Finance Minister, aims to simplify and modernize India’s tax system without making significant changes to the existing law. It focuses on streamlining the existing Income tax Act. The government will seek feedback before finalizing it and the new law is expected to apply from the tax year starting April 1, 2026. Once approved by the President, the government will update tax rules, forms and IT systems accordingly. Businesses will also need to update their systems at the same time. Overall, this marks a transition towards a more modern tax system for both taxpayers and the administration."

"The new Income Tax Bill, 2025 is a welcome step in the right direction. It is acknowledged by everyone including the higher judiciary that the Indian Income tax law is one of the most complicated pieces of legislation. Even trained legal minds find it difficult to comprehend and interpret, leave alone a layman taxpayer. Though multiple attempts have been made in the past to rewrite the law, none of the drafts could see the light of the day.

There is no doubt that it is a herculean task to redraft a living law like the Income tax Act having such a long history and wealth of judicial precedence. It is clear that the mandate to the draftsman was not to introduce any policy level or fundamental changes in the manner in which the Income tax is levied, collected or administered. Given this limitation, the proposed draft has tried to cut down considerably on the word count, length of the provisions, usage of legal jargons, provisos and explanations to make it reader friendly. It has also rearranged and regrouped the provisions in a more logical manner. The draft also prefers tables and formulae over verbose sentences.

While the preference of modern reader-friendly simple language over archaic legal language is a welcome move, one has to also be cautious about the use of unprecise and generic language over precise and time-tested legal words and phrases at the cost of certainty.

Hopefully, this is only the first step in the long overdue tax reforms. It will be imperative to also focus on making substantial changes in the tax law to provide tax certainty, increase ease of compliance and efficient dispute resolution."

"The Income-tax Bill, 2025, introduced on 13 February 2025, represents a bold and ambitious step in reforming India’s direct tax framework. Aiming for simplicity, the Bill seeks to streamline and modernize the Income-tax Act of 1961, making it more accessible and understandable to taxpayers while enhancing administrative efficiency, bringing in tax certainty and reducing litigation. The focus is not on altering the fundamental tax structure and principles but rather on creating a more user-friendly legislation. Importantly, the new Bill maintains the current tax rates, tax base, and residency rules, ensuring stability and continuity in the tax regime.

An example of simplification in the Bill is the introduction of the term ‘tax year’ in place of the confusing dual references to ‘assessment year’ and ‘previous year.’ This change is expected to bring clarity and reduce confusion and simplifying the language of numerous provisions throughout the law. The New Tax Bill also significantly reduces the length of the Income-tax Act, cutting the number of chapters and sections by about 30%, from 47 chapters and 819 sections to 23 chapters and 536 sections. This reduction in the verbiage in the law has been made possible by incorporating tables and formulas to replace lengthy textual descriptions, allowing for more efficient presentation of tax rules and provisions.

The Government has also incorporated stakeholder inputs in the Bill, for instance, with respect to the need for the Dispute Resolution Panel (DRP) to provide reasons in writing for its decision. The Bill also includes provisions to ensure the continuity of tax proceedings under the old law.

In essence, the Income-tax Bill, 2025, is a crucial reform that aims to simplify India’s tax system while retaining its core. The reduction in complexity, greater clarity, and reorganization of tax provisions will likely make the working of the law more transparent and easier to navigate for both taxpayers and tax authorities. Successful implementation will depend on the timely rollout of the necessary administrative and technological infrastructure."

"The Income Tax Bill of 2025 marks a significant step towards a simpler tax system. By cutting down on sections and words, it aims to make the tax code more straightforward and user-friendly. The introduction of a 'tax year' concept clears up confusion around tax periods, encouraging easier compliance. This Bill goes beyond its simplification objectives; it's a commitment to a transparent and efficient approach to taxation, designed to support the taxpayer and contribute to steady economic growth." 

"The Income-tax Bill, 2025, largely aligns with the existing provisions of the Income-tax Act, 1961. At first glance, it aims to simplify the legislation by consolidating similar provisions, eliminating obsolete sections, and presenting some information in a tabular format. This approach has reduced the word count by 45 percent and decreased the number of sections from over 800 (counting alphanumeric sections like Section 115A through Section 115WM individually) to 536 sections.

Other notable changes include the adoption of terms like "tax year" instead of "previous year," the elimination of the assessment year concept, rephrasing "explanations" and "proviso" as sub-sections and breaking long sentences into shorter clauses to improve readability and implementation. The Bill continues to reference certain definitions from the Income-tax Act, 1961, and there are many cross-references between tables, which could make the reading slight cumbersome."

"The new Income Tax Bill 2025 followed by lucid FAQs giving the Govt’s approach to the newly drafted bill gives clear understanding of what was sought to be achieved through the new bill. The way provisions are consolidated under specific sections with tables using simple language needs to be appreciated e.g. Presumptive taxation of residents or non-residents are now under 2 sections, also provisions relevant for computing taxable business profits (decrease in provisions from 65 to 41) makes it easier to find and understand them. Similarly putting all exemption related provisions in six schedules stating eligible persons, applicable conditions in columns/ table form will help in easier understanding and implementation. There is ample time to comprehend the impact of the provisions as the new law is to be applied to income earned in financial year 2026-2027. A quick reading reflects no material alteration to existing law framework. It means the exercise has been to recast and redraft existing law for better reading and comprehension. There were reports that a number of suggestions were made to provide better clarity, remove difficulties etc. as part of new Tax bill. It seems this will now have to be sent as part of the suggestions to the standing committee. The incorporation of taxpayers charters in the bill (through relevant notifications, etc.) will be needed is a welcome step. Taxpayers will eagerly await these. Also, Specific measures to streamline processes of assessment, appeals, etc. with a view to curtail litigation will be areas of keen interest to be watched. Let’s hope for the best for Taxpayers to reduce their compliance burden minimize litigation and provide better certainties are accomplished."

"Introduction of the Income-tax Bill 2025 is a watershed moment in the history of Indian taxation. While in modern India, income-tax was introduced for the first time in 1860, ancient Indian thought provides us with a number of taxation principles which have relevance even today. Some of these principles which are drawn from texts such as Vidura Niti (Mahabharata), Chanakya Niti, and Arthashastra and which should form the bed rock of even modern taxation systems include: 

"The New Tax Bill 2025 is a simplified version of the current Income Tax Act. The bill has removed the redundant sections. Further, it has done away with the provisos and explanations and inserted these as part of the section / clause itself. It has tried to address the anomalies in the current law. However, with the insertion of new language eg. “Notwithstanding” being replaced by “Irrespective of”, at few places, the settled positions being undone and chances of new set of litigations cannot be ruled out.

While no major policy level changes have been made, changes proposed in the Finance Bill 2025 have been incorporated in the new tax bill. The attempt has been to consolidate various provisions that scattered all across the Act. Instead of the law being verbose, use of tables and formulae have been made at a number of places. One point of relief is that the Bill states that it will be applicable from 1st April 2026 giving time to Industry, professional and administration to gear up to all the changes. There will be changes required in the forms, challans, utilities, and software tools as well as in accounting and ERP systems.

In a nutshell, while the new tax bill may achieve the objective of it being simple and concise, it is far from being considered as a significant reform. But ofcourse, the Finance Minister never promised a simple law – all that was promised was simple language and perhaps this is a major step in that direction. However, the common man will still find it difficult to navigate through the new law."

"The new Income-tax Bill, 2025 represents a significant overhaul of India's tax legislation, marking a pivotal shift towards simplification and modernization of the Income-tax Act of 1961 (‘the 1961 Act’). The Bill, which spans into 622 pages, reduces the complexity of the 1961 Act and replaces intricate legal jargons with clear and straightforward language. Another notable aspect of the Bill is the strategic use of tables and formulas, which will help simplify interpretation of the provisions. The Bill aims to minimize disputes and litigation while enhancing taxpayer certainty. Notably, the Bill introduces a "trust first, scrutinize later" philosophy, aligning with the government's ideology of "minimum government and maximum governance." Unlike the 1961 Act, the Bill empowers the CBDT to establish tax administration rules and implement digital tax monitoring systems, thereby increasing efficiency without frequent legislative changes. Scheduled to take effect on April 1, 2026, the Bill is set to foster a more transparent and taxpayer-friendly environment, representing an important milestone in India's tax landscape."

"The Finance Ministry’s endeavour to simplify the Income-tax law and present a reader friendly statute is commendable. This is certainly a positive starting point and should facilitate in reducing tax disputes going forward. However, the Finance Ministry should parallely focus on fast-tracking past litigation; particularly as a significant portion is still pending at the Commissioner (Appeals), first appellate authority. Resolving past litigation will truly be a move towards Viksit Bharat and improve taxpayer sentiments"

The Income Tax Bill, 2025 has been a much awaited legislation since the proposal of Direct Tax Code. The Bill’s arrival will keep the tax professionals occupied for a considerable time until the new section numbers get assimilated into the tax vocabulary. The focus of the Income Tax Bill, 2025 is on: 

(i)             Simplification of language without disturbing the meaning.

(ii)           Consolidation of scattered provisions in one section/ schedule.

(iii)         Elimination of redundant provisions.

(iv)          Enhancing clarity.

(v)           Ensuring ease of compliance.

(vi)          Use of legal and technical jargon have been minimised.

Substantively, the concepts remain intact so that the jurisprudence that has evolved and accepted is not disturbed thereby avoiding fresh disputes. The charging provisions, section 4, 5 and 6 and incomes that deem to accrue or arise under section 9, heads of income i.e. salary, house property, profits and gains of business or profession, capital gains and income from other sources remain same. The removal of provisos and explanations has led to further simplification.

The draftsmen have taken cues from globally followed best practices in drafting of tax legislation which is laudatory. The Income-tax Act, 1961 has been a formidable piece of legislation for the laity, students and non-tax lawyers too. A simplified legislation will make life easier for salaried individuals and small business who can now attempt to calculate their taxes and file returns with minimum intervention of the professionals. The reader friendliness will enhance clarity and will make the taxpayers more informed about their rights, eligibility and deductions. 

This is a step in the right direction as the Income-tax Act, 1961 was certainly a complex legislation which over the years of litigation and subsequent amendments had become difficult to comprehend by the taxpayers and had become a boon for protracted litigation. The engagement with stakeholders and requisite clarifications by way of FAQs and Circulars will contribute to swifter reconciliation between the old and the new. It is hoped that, in the times to come, the bureaucratic machinery will not depart from the vow of simplification made by the Government.

"The proposed Income-Tax Bill, 2025 introduces detailed procedural reforms that, while not as sweeping as major legislative changes, are crucial for the efficient administration of income-tax law. These adjustments enhance operational clarity and effectiveness. The Bill reflects the intent to improve lucidity and ease of understanding, aligning with the stated objective of the comprehensive review of the Income Tax Act, 1961. The proposed Income-Tax Bill, 2025 retains the same number of chapters as the existing law but significantly expands its scope with 536 sections and 16 schedules, compared to the current Income Tax Act's 298 sections and 14 schedules. This comprehensive framework reflects an effort to enhance lucidity and ease of understanding, aligning with the objective of the comprehensive review of the Income Tax Act, 1961.

To simplify the statute, the Bill eliminates explanations and provisos, opting instead for a more straightforward structure. It introduces new concepts such as the “Tax Year” in place of the traditional “Previous Year” and “Assessment Year.” Additionally, it incorporates provisions on revenue recognition for service contracts, the allowability of Mark-to-Market (MTM) losses, and the valuation of inventory at the lower of cost or net realizable value, which were previously governed by Income Computation and Disclosure Standards (ICDS). Certain judicial interpretations, such as the set-off of short-term capital loss against business income on scrapping business-held capital assets, have been explicitly incorporated into the Profits and Gains from Business or Profession (PGBP) computation. Also, the proposed Bill requires DRP directions to clearly specify points of determination, decisions, and reasons, thereby enhancing transparency and dispute resolution quality in tax matters.

The Bill also enhances clarity by consolidating salary-related deductions, such as standard deduction, gratuity, and leave encashment, into one section, reducing complexity by avoiding multiple cross-references. A formula-based approach has been adopted to simplify calculations, as seen in the redefinition of Written Down Value (WDV) for asset blocks. Furthermore, all provisions related to Tax Deducted at Source (TDS) are unified under a single clause with simplified tabular representations, streamlining compliance and reporting requirements. However, this consolidation will necessitate substantial updates to reporting forms and utilities once the Bill is enacted.

Post parliamentary approval and potential amendments, the new Bill is expected to take effect from April 1, 2026. Consequently, the computation and reporting of taxable income for the financial years ending March 2025 and March 2026 will continue under the provisions of the current Income Tax Act."

"With the Finance Bill 2025 updating the threshold of various TDS provisions while retaining the various sub-divisions and proposing a block assessment code for transfer pricing, it made one wonder if at all there would be any game changing amendment in then pending Direct Tax Bill.  The Income tax Bill 2025 introduced in Parliament today doesn’t disappoint and has ported the old law (1961) into the proposed new law (2025) with neat grammar changes and consolidating provisions under structured headings and cross referenced Schedules with an investment of a mammoth 60,000 man hours. 

The index of the new law also makes it user friendly for a person to navigate through the expanded income-tax Act. The Govt has also rushed into clarify that the rationale seen in other countries which did similar simplification was followed in India resulting in structural simplification and linguistic simplification while balancing the challenge of an expanded income-tax act which apparently emerged in Australia and UK as is pointed out.  The fine print which deserve to be analysed in some detail suggests a tax payer may  no longer have the option of seeking an application u/s 195(3),  there are restrictions proposed  on the availability 80M and the order of DRP should now have to be a reasoned speaking order.   Further under general deductions notified settlements will no longer quality as expenditure and corporates have to be wary of tax consequences of regulatory settlements

The Bill seeks to incorporate the provisions of Tax payers charter, Advance ruling mechanism and Alternate dispute resolution through notification process which is awaited, these are crucial asks from industry.  The announcement of the Hon’ble FM that the Govt is working to strike a revised Bilateral Investment treaty which is crucial to galvanise FDI; once these notifications are made available it would give tax payers clarity on their investment rights.  If the Govt can as a follow up issue detailed guidelines relating to its position on crucial tax matters under appeal as also suggest how the CIT backlog would be cleared, it would  help the tax payer community.

"A bill which was promised to be simple in language content is adverting the statement of FM. No major changes but simple structure simple to understand. Removal of Provisos explanations in the section makes easier for readers. People who expected large scale reforms in Income Tax may be disappointed. The bill follows Tax Year instead of Previous Year and Assessment year rationalises Penalty and Prosecution provisions/ Further the new Act uses Tables which makes it easier for the taxpayer and tax administrator to understand. The tax jurisprudence which was developed over a period continues to be relevant. Critics may say the opportunity to reform tax is missed. In my view the object of FM is to have legislation with simple language and easy to read and understand is well achieved. Further the lot of interpretations due to presence of provisos/explanations will not be there due to way the act is drafted. In one stroke the entire scheme of act which is hinging on interpretation  is changed. Above all no new concepts were introduced unlike Direct Tax Code. On all these reasons the efforts and direction of FM is to be lauded."

New Income Tax Bill 2025 – Key Insights

"The government introduced the Income-Tax Bill, 2025, which aims to simplify and streamline the tax system. Presented by Finance Minister Nirmala Sitharaman in the Union Budget on February 1, 2025, the bill seeks to reduce complexity and improve compliance for taxpayers. It retains the existing tax structure but replaces outdated provisions and introduces clearer language, including the new concept of the "tax year" to replace the "assessment year."

The bill will be effective starting April 1, 2026, and reduces the Income-Tax Act’s length from 823 to 622 pages. Despite this, the number of chapters (23) remains unchanged, while the number of sections has increased from 298 to 536. It consolidates scattered provisions and simplifies complex tax terminology. The new bill also brings together TDS-related sections and clarifies deductions for salaries into one section.

While the financial year remains the same (April 1 to March 31), the bill introduces provisions for digital assets, including cryptocurrencies and NFTs, under taxable capital assets. It removes outdated exemptions and unnecessary references to old laws. The Dispute Resolution Panel (DRP) now clearly defines its procedures for resolving tax disputes.

Importantly, the bill does not alter income tax slabs, deadlines, or capital gains taxation, ensuring stability and predictability for taxpayers. It also consolidates tax provisions across different laws, enhancing clarity. The overall aim is to simplify tax laws, with improved structure and language, while leaving tax rates and compliance mechanisms unchanged.

In summary, the Income-Tax Bill 2025 focuses on simplifying tax provisions, offering a more efficient framework. With a clearer and more concise structure, the bill aims to reduce disputes, simplify compliance, and modernize tax administration."

A welcome move.

"Budget 2025 was a blueprint of bold ideas that the government is committed to implement towards the goal of India emerging as developed economy in two decades. Roll out of the draft Income tax law is one such bold policy initiative. The overall architecture of the new legislation as proposed is underpinned by three important principles, i.e. modernization of tax policy such that the new law can keep pace with evolving business dynamism, clarity in taxation principle such that the outcomes are minimally litigious and finally, bringing about simplicity in tax compliance processes to encourage wider voluntary compliance across the board. The draft legislation has deftly carved out detailed mechanism to ensure smooth transition of taxpayers into the new legislative framework of compliances without having to forfeit any of existing concessions; and that is indeed a promising plank for this overhaul. That said, Taxpayers will still need to adapt to the new experience in am more structured manner over next 9 to 12 months.

With the extant income taxes legislation ageing, an overhaul has been arguably overdue. Whilst the government has successfully brought about tax rate reforms over past four years, making the tax rates a lot more competitive, the focus had to shift towards simplifying administration and brining about enhanced transparency. The new avatar of income tax legislation proposed in the Parliament ought to go a long way in repairing this objective and at the same time, ensuring our taxation system is a lot more contemporary and modern keeping pace with business dynamism, and one that can inspire voluntary compliances and in effect, keep the scale and volume of tax controversy to manageable scale. The move sends a strong signal to trade and industry, both domestic and global inbound, that the government is willing to walk the extra mile in ensuring ease of doing business through legislative reforms in tax matters."

"While the general perspective was whether just for simplification, an entire new act is required or could these changes have been done as amendments through finance bills introduced in budgets. Did we need a new act is a question we will keep grappling with for some time to come. The present government has over-hauled / replaced many laws especially laws that have been in place for decades like the Evidence Act 1872 changed to Bharatiya Sakshya Adhiniyam, 2023 (also Indian Penal Code, 1860 and Criminal Procedure Code, 1973 were replaced in the year 2023). GST law was introduced by the present government in 2017, this seems to be one more step in that direction.

While the language, manner of presentation and clubbing / consolidation of sections with a clear focus on clarity and simplicity is commendable and refreshing, there will be a lot of discussions around drafting, intention, interpretation of new terms used like there already is a lot of discussion on the use of the words irrespective of instead of notwithstanding, etc. 

While the charging sections, residential status assessment, tax heads, assessment and other mechanisms / procedures haven’t been tinkered with, there are a few insertions which will be closely followed by the tax fraternity and all stakeholders. Now that the new proposed law’s text is available, one would assume new rules would also be introduced to reflect these changes. 

In terms of specifics, ability to refer to central laws (other than tax laws) to interpret terms not specifically defined in treaties and that too from the date the treaties are effective could have far reaching and retrospective application. Non granting of the deduction for dividend received in case of a holding - subsidiary relationship (Section 80M of the 1961 Act) in case of companies adopting the new regime seems to be a drafting error and hopefully will be rectified / appropriately clarified. 

All in all, the efforts put in by the Government to simplify the law are clearly evident. One hopes the administration of the new law once introduced is also made in the true spirit and with a view to reduce ambiguity, reduce litigation and bring certainty to tax provisions which will help in a big way in India’s Ease of Doing Business quotient."

“Trust First, Scrutinize later” has been resounding across the country after the Finance Minister made a reference in her Budget Speech on 1 February as she announced   the new income tax legislation to be released. This is a golden opportunity to strengthen India’s position as a competitive and attractive investment destination by creating a modernised tax system aligned with recent government initiatives, therefore enhancing compliance and growth. This bill will empower businesses, support the aspirations of India’s middle class, and fuel consumption-driven growth. As the economy moves toward a $5 trillion milestone, a robust and fair tax structure will be instrumental in realizing this vision. We applaud the government’s decisive move and look forward to a future where taxation is a catalyst for India's economic prosperity."

"The Income Tax Bill, 2025, introduced in Parliament on 13 February 2025, aligns with the Finance Minister's commitment to simplify the six-decade-old Income Tax Act of 1961. The existing Act, which was amended nearly 65 times with more than 4000 amendments had become complex and bulky.  With 536 sections, 23 chapters, and 16 schedules containing about 2.6 Lakh words, the bill contrasts with the earlier Act which comprised of 819 sections effectively, with 47 chapters and 14 schedules. 

Key highlights of the new bill include a focus on textual and structural simplification. By refining the language, integrating formulas and tables, and eliminating outdated provisions, the government aims to make tax law more accessible for taxpayers. While the bill does not introduce major policy shifts, it aims to make the law concise by incorporating the provisos and explanations from the earlier Act as separate sub-sections itself, deleting duplicative definitions and removing redundant transitional provisions. Further clarifications are expected in the form of Rules that will be prescribed under the proposed bill. A significant change is the introduction of a "tax year" to replace "assessment year" and "previous year," aligning with international practices and addressing long-standing requests from the tax community. Additionally, 'notwithstanding' has been replaced with 'irrespective' to streamline the language. 

Though the proposed bill may be seen as old wine in a new bottle, it attempts to simplify the earlier Act. However, both, tax professionals and authorities alike would face a herculean task of familiarizing themselves with the new section numbers and construct of the Act. Also, redrafting and repositioning of the provisions might lead to certain ambiguities and interpretational issues, which would have to be ironed out over time. 

In summary, the Income Tax Bill, 2025, modernizes India's tax laws, aiming for a user-friendly and transparent framework. Its success now depends on the practical implementation since the Government would need to overhaul the forms, train its officers, and update its infrastructure and systems before it is put in effect from 1 April 2026. However, all said and done, the intent is clearly a step in the right direction, and it will also contribute to improving India's position in the global ease of doing business rankings."

"From our perusal of the Income Tax Bill, 2025 introduced by the FM Ms. Sitharaman earlier today before the Indian Parliament, the important aspects that we could identify are: 

1. This is an extremely good attempt to substitute the existing Income Tax Act, 1961 with the new legislation.
2. This is very simply worded, meticulously structured and very well presented legislation.
3. The fact that the number of sections have approximately ben reduced from 819 to 536 and the number words have been reduced from 5.12 lakhs to 2.6 lakhs deserves specific credit.
4. The fact that all the provisos and explanations have been deleted, goes to show the extent of hard-work put in by the Government and the revenue officials to further simplify the new tax legislation.
5. There is fundamentally no change in the tax provisions is an excellent step and it would also continue to receive judicial support and taxpayers shall also be able to rely on past judicial precedents.
6. As there have been no changes to the tax provisions, it will not alter India’s position before other countries in her tax negotiations;
7. As a welcome change, all the relevant provisions pertaining to withholding tax have been consolidated in a tabular format;
8. All the provisions applicable to charitable institutions have been incorporated in a separate chapter;
9. All deductions for salaried individuals have also been incorporated in the chapter for salary;
10. All the exemptions have been put together separately, thereby making them easier to refer."

Fiscal laws should enable and facilitate growth and should not be an impediment to growth. Therefore, as we march on the journey towards becoming a developed nation, our tax laws need to be simple to understand, easy to administer and reduces litigation. The introduction of new Income Tax Bill 2025 (the Tax Bill) is a step towards that direction. In the Budget 2025 speech, the Hon’ble Finance minister clearly stated that “New income-tax bill will carry forward the same spirit of “Nyaya”. The new bill will be clear and direct in text with close to half of the present law, in terms of both chapters and words. It will be simple to understand for taxpayers and tax administration, leading to tax certainty and reduced litigation.” As we read the Tax Bill the first impression is that it is in line which the objective being stated. It is certainly shorter in terms of number of sections from approximately 800 to 536 and the provisos and explanations which were added over a period of time giving complexity to the understanding are being removed. The overall structure and format of new Tax Bill is simpler for the readers to comprehend. Other than simplification, the consolidation & categorisation of withholding tax provisions & provisions related to charitable institutions is a welcome change. But as we say, “Any change, even a change for the better, is always accompanied by its challenges and discomfort”. So, how can this be an exception? There are provisions in the Tax Bill like change in the definition of “Associated enterprise” , usage of term “irrespective” instead of “notwithstanding”, borrowing the definitions from other central laws in case any term is not defined in DTAA or the Act or Notification, which would leave a room for interpretation and litigation which per se is against the primary objective of introduction of the Tax Bill. 

"The Income Tax Bill, 2025 gives a sense of nuts and bolt process reforms that are not as transformational as large substantive changes or amendments but are just as important for the efficient implementation of the income-tax law. Lucidity and ease of understanding which were signalled as the purpose of the comprehensive review of the Income Tax Act, 1961, can be intuited from the new draft. The Income Tax Act, 1961 with 298 sections and 14 schedules has now been recouped into 536 sections over 23 chapters with 16 schedules. The Bill, subject to approval and amendments under the parliamentary process, is slated to be effective only from April 1, 2026, which implies that computation of taxable income and its reporting, for Financial Years ending March 2025 and March 2026, would still be required to be done under the existing Income Tax Act itself.

The structural changes in the bill to assimilate subject matter provisions which are currently scattered across multiple sections makes the bill comprehensive and easy to read. For instance, deductions from salaries such as standard deduction, gratuity, leave encashment etc, have now been tabulated at one place, instead of being diffused over different sections and rules. The concepts of explanations and provisos have been removed from the new version, for ease of interpretation and understanding. New concepts such as tax year, instead of previous year and assessment year, have been introduced. New sections covering revenue recognition for service contracts, provisions on allowability of MTM losses, valuation of inventory at lower of cost or net realisable value, which were hitherto sheltered under ICDS, have now been brought into the new bill itself. Certain provisions such as allowability of set-off of short-term capital loss against business income on scrapping of business held capital assets, which was interpreted in favour by the Courts, have now been brought into the PGBP computation section itself.

Income not forming part of total income have now been moved to schedules to simplify the statute. Formula based approach have been adopted, for instance, definition of WDV in case of block of assets, which was earlier verbose, is now broken down into a simple formula. All TDS related sections have been brought together under a single clause with simple tables, for ease of understanding, though this would mean post notification of this bill later, a lot of changes would be required in forms and utilities, for reporting purposes."

New Income Tax Bill 2025 – Key takeaways

"The copy of the New Income Tax Bill 2025 (“ITB”) has been made available to the Members of Parliament (MPs) on 12 February 2025 and has been tabled in the Lok Sabha today. After the GST reform in 2017 wherein all the indirect taxes were subsumed, the effort made by the government to revamp completely the Income-Tax Act (which was legislated about 64 years ago) is quite appreciable.

The move to streamline the provisions of the Income Tax regulations was much awaited considering that it may not be easy for a layman to comprehend its provisions and there has been a long history of pending litigations at various appellate authorities. This also aligns with the government’s efforts to ease the administrative aspects of doing business and commitment of the tax department to “trust first, scrutinize later”.

Some of the key takeaways based on perusal of the Income-Tax Bill 2025 made available with the MPs are as under:

a. Overview of the Construct as compared to the earlier Income-Tax Act 1961 (“ITA”):

The ITB is proposed to be effective from 1 April 2026 and would comprise of 536 sections, which are spread over 23 chapters and 16 schedules. The quick overview of the ITA and ITB framework is as under: 

Further, it is observed that as compared to the ITA, there has been a significant effort made to remove the Proviso, Explanations contained in the sections and wherever necessary, tables have been inserted to make it more subtle and legible. For instance, the meaning of “agricultural land” as contained in the ITA was quite complex as it was in a para format. Now under the ITB, an effort has been made to tabulate certain part of the wordings, to make the meaning of “agricultural land” easier to comprehend.

b. “Tax Year” has replaced the concept of  “Assessment Year” / “Previous Year”

The term “tax year” has been defined under section 3 of the ITB to mean the twelve months period of the financial year commencing on the 1st April. Further in case of a business / profession newly set up, or a source of income newly coming into existence in any financial year, the tax year shall be the period beginning with (a) the date of setting up of such business or profession; or (b) the date on which such source of income newly comes into existence, and in both cases ending with the said financial year.

In the new ITB, the term “tax year” has replaced the terms such as “Assessment Year” or “Previous Year”, which in many cases were misconstrued by the taxpayers. This was an expected change and would definitely provide more clarity to the domestic and foreign taxpayers to clearly decipher the provisions of the ITB and the specific year to which reference is made.

 c. No notable changes in Tax Rates

Based on perusal of the ITB, it is notable that there has been no further change proposed in the ITB with respect to the tax rate structure as applicable to the assessees. The focus of ITB is to streamline the framework of the Income-tax regulations to make it user-friendly and clear.

d. No substantive changes in the Residential Status in case of Individuals, HUFs, Companies, etc.

With respect to the residential status determination, there is no substantive change in the provision as per the New Income-Tax Bill 2025. 

1. In the new Bill, the determination of residential status is also contained in Section 6 and has been rephrased without any change in the meaning
2. Sub clauses have been renumbered: For instance, deemed residency u/s 6(1A) of Income-tax Act 1961 is now contained in section 6(7) of the Income Tax Bill 2025
3. Further, there is no substantive change in the determination of residential status in case of other assessees such as Companies, HUFs, etc which are contained in section 6 of the ITB
4. Only change seems to be “previous year” is replaced with “Tax Year”

 e. No change in the heads of Income:

Currently under the Income-Tax Act, the income chargeable to tax is classified under 5 different heads of Income. It was expected that there could be certain change in the heads of Income. However, on perusal of the ITB, it is notable that no change has been made with respect to the heads of Income and it has been retained as under: 

• Salaries
• Income from house property
• Profits and gains of business or profession
• Capital Gains
• Income from Other sources 

f. Separate Rules to be Prescribed under the ITB

Currently, the provisions of the ITA are to be read along with the ITR in many cases. For instance, Rule 8D of the ITR provided for computation of expenditure (which is disallowable) in relation to exempt income as provided in section 14A of the ITA. Further, there are certain valuation rules prescribed under Rule 11UA for valuation of assets (including shares of listed, unlisted companies). There are also rules prescribed under the current ITR w.r.t. valuation of perquisites, etc.

As per the ITB, in many cases it has been mentioned that rules would be prescribed under the ITB. Further, section 2(80) defines “prescribed” to mean prescribed by Rules made under this Act. As such, we also need to separately await the rules under the new ITB which would provide more clarity on the operational aspects, such as perquisite valuation, disallowance of expenditure incurred to earn exempt income, valuation rules, etc.

g. Section 10 of the ITA which provides for exemption from tax in certain cases, has now been separately covered in Schedule II to Schedule VII of the ITB

Section 10 of the ITA, which provided for exemption of certain income such as agricultural income, share of profit from partnership firm, family pension, scholarships, certain interest on NRE / FCNR deposits, short stay exemption, etc has now been covered separately in Schedule II to Schedule VII of the ITB in a tabular format. This presentation in the ITB would make it easier for the layman to refer the specific schedule applicable in their case to determine whether any specific income is exempt or not. This has been a welcome change and it aligns with the overall objective to streamline the ITA and make it more comprehensible for the layman.

h. Provisions of the TDS / TCS applicability which was earlier covered in Chapter XVII of the ITA has now been consolidated in a tabular manner in the ITB

Under the ITA, there are several sections such as 194A (Interest), 194I (Rent), 194J (Professional fees, Fees for technical Services, Royalty payment), 194H (Commission), 194C (Contracts), etc. Most of the sections had similar provisions except for the applicable tax rates, thresholds, etc.

Under the ITB, the issue of overlapping and almost similar provisions of TDS was addressed by covering the TDS provisions (except salaries) under section 393 of the ITB in a concise and tabular manner. Further the provisions of TDS on Salary contained in section 192 of the ITA has been covered in section 392 of the ITB. Similarly, the provisions of TCS contained in section 206C of the ITA has been covered in a tabular manner in section 394 of the ITB for ease of reference. This is a welcome move and would make the TDS / TCS provisions easier to understand and would help in better compliance, avoid tax leakages and ensure administrative ease.

i. Provisions of withholding tax on payments to non-residents such as Royalties, FTS, Dividends, Interest would be governed by section 207 of ITD and no changes proposed in the applicable tax rates

Currently, section 115A of the ITA provides for the applicable tax rates on certain payments to non-residents such as towards Royalties, Fees for Technical Services, Dividends, Interests etc and the rates applicable is 20% under the ITA (subject to the benefit available under the DTAA). On perusal of the ITB, it is notable that similar provisions have been covered in section 207 of the ITB wherein the tax rates are tabulated for ease of reference and further that no substantive change is proposed in the rate structure."

"Income-Tax Bill, 2025, marks a significant structural shift in India’s tax administration. The Bill primarily aims to simplify and modernize the six-decade-old tax framework while ensuring policy continuity. It retains the existing tax structure but eliminates redundant provisions, restructures sections for clarity, and introduces streamlined terminology, such as replacing "Assessment Year" and "Previous Year" with a unified "Tax Year."

Key Business Expectations and Impact:

1. CBDT’s Expanded Role in Tax Administration:
   The CBDT (Central Board of Direct Taxes) has been granted broad procedural powers, similar to the GST framework, enabling it to issue real-time rules and compliance mechanisms without frequent legislative amendments. Faceless assessments, AI-driven scrutiny, and digital tax monitoring are set to gain momentum under this new structure. While this improves tax agility, businesses must be mindful of potential increased regulatory oversight.
2. Streamlined TDS/TCS Mechanism:
   A notable procedural improvement is the consolidation of TDS and TCS provisions into a single section with simplified tabular structures, significantly reducing compliance complexity. However, businesses had expected rationalization of TDS rates, which remains an unmet demand.
3. Digitalization and Real-Time Compliance:
   The Bill enhances e-governance, requiring businesses to align with updated digital tax systems and forms. Further, tax authorities now have extended powers to access electronic records, emails, and financial data during searches, highlighting the need for robust data protection safeguards.
4. Faster Tax Policy Implementation:
   Previously, tax schemes such as VDIS (1997), IDS (2016), PMGKY (2016), and Vivad se Vishwas (2020) were enacted separately via Finance Acts. Now, under the Income-Tax Bill, 2025, the Central Government can introduce such schemes directly through notifications, eliminating legislative delays. This change brings greater flexibility in tax policy execution, akin to the GST model.
5. Litigation and Dispute Resolution Measures:
   The Bill incorporates stakeholder feedback, such as mandating the Dispute Resolution Panel (DRP) to provide written reasons for decisions, improving transparency. However, businesses still seek structural reforms to reduce tax litigation, particularly in areas such as M&A tax treatment, ESOP taxation, and international tax dispute resolution. 

The Income-Tax Bill, 2025, is a step forward in simplifying India's tax framework. By embedding clarity from past circulars, notifications, and judicial precedents directly into the law, it enhances tax certainty and reduces ambiguity. However, the lack of significant policy reforms—particularly in corporate taxation, capital gains, and ESOP treatment—remains a point of discussion. The Bill sets the stage for future reforms, and businesses must prepare for an era of dynamic, technology-driven tax governance."

New Code or Old wine in a different bottle?

"It aligns with the government's ongoing efforts to reform yet simplify significant legislation, similar to last year's transformation of the Indian Penal Code into the Bharatiya Nyaya Sanhita. The development of the bill was a substantial undertaking, integrating feedback from industry bodies, stakeholders, and professional organizations which sought to simplify and consolidate provisions, remove obsolete and redundant provisions, multiple explanations and provisos, thereby making it easier for people to read and understand.

This bill takes commendable steps to reduce verbosity by incorporating tables and using simpler language. Importantly, it maintains a stable tax regime by not introducing new taxes or concepts. The new code respects the fundamental principles of taxation and hence ensures that the over 75 years of legal precedents established under the previous Income-tax Act, 1961 should continue in principle. How one practically approaches the savings provisions would have to be seen.

While the bill provides clarity by embedding various clarifications and guidelines within its framework, making it more comprehensible and user-friendly, one does contemplate if the same could have been done by way of amendments to the existing Act.  The bill incorporates guidelines and clarifications issued by the administration on various key areas such as the computation of profits and gains from business and profession, salaries, and other procedural matters. However, multiple approaches to interpreting the rtransition provisions and open proceedings and established jurisprudence will lead to litigation. 

The job is not yet complete as the bill still requires legislative approval, followed by implementation, which involves overhauling tax return forms, corporate accounting systems, and tax filing software, among other changes. With an expected implementation date of April 1, 2026, there is sufficient time to make these necessary changes.

In conclusion, while the new tax bill achieves its goal of being simpler and more concise in many respects, it remains a piece of tax legislation and will inevitably pose challenges for the average person to fully comprehend."

Some quick comments on The Income Tax Bill 2025

"The Income-tax Bill 2025 (Bill) seeks to simplify the existing Income-tax Act, 1961, by making it more concise and easier to understand. One of the main objectives of the Bill is to use clear, straightforward language, minimizing legal and technical jargon. This is intended to make the tax laws more accessible to the general public. Many scattered provisions have been brought together in single sections or schedules, while redundant clauses have been removed entirely. This streamlining has helped reduce the length and complexity of the legislation. The Bill incorporates tables and formulae, making it more transparent and easier to follow. The Government has clarified that no major tax policy changes have been made in the Bill to ensure continuity and certainty, and the changes proposed in the Finance bill 2025 have also been incorporated in the Bill as well.

• Upon a deep dive into certain sections, it is observed that the Bill does not provide the benefit of deduction for inter-corporate dividends (currently under section 80M) to companies opting for the concessional tax regime (ie 22%), while the benefit is provided to new manufacturing domestic companies under the 15% tax regime. This appears to be an oversight or an unintended omission, and one hopes that  necessary correction will be made.
• Secondly, with the intent to reduce tax disputes, the Bill mandates the ‘Dispute Resolution Panel’ (DRP) to pass a speaking order with reasons while deciding objections / grounds taken by a taxpayer. This is a welcome move, as it has been practically observed that the DRP often passes cryptic orders, and in certain cases, it has directed the tax officer to consider the submissions filed by taxpayers before DRP and pass a speaking order, which was not permissible in law. Adjudication of tax dispute is the ‘statutory function’ and ‘duty’ of DRP and it cannot be passed on to the assessing officer who has passed impugned draft order
• Since the Government is brining entirely new income tax legislation in the form on this Bill, one would expect that it should also contain some effective checks and balances against ‘high pitched’ tax assessments often made by tax officers. Some sort of meaningful accountability in the action of ‘field force’ is desirable from fairness and reasonableness perspective. That will also support Government stated objective of creating environment of ‘ease of doing business’ in India.

The Bill has been drafted after considering stakeholder suggestions wherever feasible. Drawing cues from the simplification models of Australia and the UK is laudable and shows the Government's pragmatic approach."